Wednesday 6 February 2013 09.16 EST
First published on Wednesday 6 February 2013 09.16 EST

It's the middle of the hot Antipodean summer, but when Stephen Elop comes into the room of journalists he's wearing his suit jacket. Nokia's chief executive wipes his brow with a handkerchief and then settles to face an inquisition.

The surroundings are august: a swanky penthouse suite in the city of Sydney. The omens are not: of the gaggle of Australian and New Zealand journalists, only the Sydney Morning Herald's writer has a Nokia phone; the others have iPhones or Android phones as recorders. This is the challenge Elop, and Nokia more generally, faces – a smartphone market where the Lumia is in a tiny minority.

The challenge has also been heightened by BlackBerry – formerly RIM – seeking to reinvent its offering, with the newly released Z10 handset and BB10 software. With the smartphone market growth slowing, the heat is on for Elop to drive Nokia to success against all those iPhones and Android phones – as well as the rebranded rival from his home country, Canada.

Elop says he has visited Australia several times with his family, and loves the place; and he's captured some of those moments – with a Nokia Lumia, of course. He's an engineer by training, after all, and features such as the top-end Lumia 920's optical lens stabilisation (for minimising wobble in pictures or video on the move) matter to him.

The local angle disappears fast, however. Despite his apparent familiarity with the territory, neither Elop nor his Australian general manager has any information to share about the Nokia in the antipodes.

Questions about seemingly important statistics such as how many employees Nokia Australia has, how much money it makes or for that matter, how many devices it sold last year are met with "we don't break out the figures for our regional operations" by Nokia staff.

It's global or nothing for "No-key-a", as Elop pronounces it (though Finns call it "Knock-e-ya"). The company is indeed an international entity, but one whose Finnish roots go back to 1865, when the country was a Russian Grand Duchy.

How Nokia fares is deadly serious business in Finland: the company is such a large part of the Nordic country's economy, that even as its decline began in 2008, Nokia's £42.7bn annual turnover was a quarter of Finland's gross domestic product of £163.2bn.

In that year, more than 23,000 of the 125,000-plus Nokia staff worldwide were employed in Finland; but last year, Elop closed the last factory in the country and sacked 3,700 of them as part of a larger payroll purge of 10,000 workers.

While the latest set of financial figures are looking up, making Nokia profitable for the first time in six quarters, for a comparatively small country to see employee numbers rapidly shrink over the past few years must be a worry.

What do Finns think of Elop's work at Nokia then?

"I don't know. You'd have to ask them," Elop replies bluntly, but then quickly adds in a more ameliorative tone: "What I will say is that the level of support that we receive from the people of Finland is intense and intensely positive. The people of Finland have been very supportive of what we're doing."

The Finnish media tell a slightly different story. After the June 2012 job cuts, the Finnish Iltalehti paper reported (Google translation) that Elop was accompanied home by security guards.

Nevertheless, Elop believes Nokia's downsizing and outplacement programmes are a good thing for Finland. "I think you'll see over time that entire new industries, or extensions of the technology industry which we're in, have been formed because of how we've approached this," he says. "We think that's good not only for Finland, but ultimately for Nokia as well," he adds.

Tablets, phablets and Android

Perhaps the effects of downscaling as old markets evaporate and the company goes "from being a leader to a challenger", as Elop sees it, is a positive development, but surely selling more devices is what it should do?

Where are the tablets and "phablets" – the in-between phones with screens larger than 5in diagonally, as pioneered by Dell's Streak. Elop says Nokia is considering them, and looking into platform options such as Windows 8, Windows RT – as used on the Microsoft Surface – and even Android.

Well, not really Android: Elop says Nokia is a latecomer to Google's hugely successful mobile operating system, and that market is now owned by Samsung. Also, going Android could mean being forced to use Google properties such as Maps instead of Nokia's Navteq equivalent and joining the Open Handset Alliance.

"Yes, you can call it [Android] open source but in practicality, you're getting more and more constrained on what's possible in that environment," Elop says. "I've said repeatedly that our primary focus is Windows Phone. Other ecosystems going sideways at this point doesn't make sense."

Elop won't explain though how that differs from being tied to Microsoft in a three-legged race where Redmond decides not only the pace at which to run – through the timing of its OS upgrades – but also where and how to run, in terms of the interface and features.

Microsoft or bust

"The Lumia product, using Windows Phone software works better than anything else with the Microsoft systems like the Exchange mail capability or SharePoint, and of course we're therefore aggressively going after the business marketplace as well," Elop says.

Lumia handsets running Windows Phone – whether the new 620 or the already-launched 820 or top-end 920 models – are where the action is for Nokia. Being different from the mass is the key; using Windows Phone is part of that strategy.

Elop proudly shows off some night-time photos from Helsinki that he was able to take on the 920 in low light, thanks to the camera's anti-shake system, and points to other cloud-based features on the platform such as music, navigation, entertainment and office productivity that's part of the Windows Phone eco-system.

But Nokia isn't quite sticking to a single-platform strategy, and Microsoft doesn't drive it everywhere. In fact, its top-selling smartphones are the Asha devices running the Series 40 software introduced in 1999. Nokia sold 9.3m Asha devices in the fourth quarter, and 2.2m Symbian ones – the latter being the "burning platform" from which Elop, and Nokia, jumped off in February 2011. In comparison, it shipped 4.4m Lumia smartphones in that crucial fourth quarter.

You can wrangle over the definition: analysts such as Gartner and IDC don't class the Asha as a smartphone (because it won't run third-party apps). But it does offer web browsing and email. Equally, the Asha range retails at much lower price than the Lumia phones – Elop says it's in a price band "roughly below $100 (£65)" and that Nokia has had "remarkable success" with selling the phones in less wealthy markets where people are very sensitive about the ongoing cost of the device in question.

The Lumia is aimed at wealthier markets – and China. Nokia has signed a deal with China Mobile to sell the Lumia 920T there on its unique TD-SCDMA (time division synchronous code division multiple access protocol for data) low-speed cellular network – a protocol that isn't used anywhere else in the world. But China Mobile has more than 700 million subscribers – more than all its rivals combined.

BlackBerry: revival?

Nokia can't count on having the business market to itself, with a revitalised BlackBerry, which has the advantage of having already been the darling of corporates and governments – until the iPhone came along and crushed it, with Android devices in tow.

What's more, the new BB10 OS makes porting Android apps possible, potentially giving the Canadian company access to a vast number of popular applications already used by millions of customers.

Elop dismisses that, saying that porting to BlackBerry only works for apps that don't connect to Google services. Also, porting will only work if the apps happen to align to a particular screen size he says.

"In a broad sense, it's a good general approach – but in practicality, it doesn't take you very far," he says.

Native apps is the way to go, he says, and points to the Microsoft Windows Phone platform: "When we started with Microsoft, there were 6,000 applications on the Lumia platform; now there are 125,000," he says. What's more, some of those are "differentiating applications, things that you can get on our platform but not on other platforms, and we think it's very advantageous."

Urgency or emergency?

Elop recognises that technology waits for no one, and that Nokia can't rest on its now frayed laurels. "If you look at everything that changed just in 2012 or 2011 or 2010 all the way back to the iPhone in 2007, so much has been changing each year and that's going to continue this year for sure," he says.

The market is accelerating, Elop says, with device life cycles dropping to six months from two years. Companies have to move faster – but not only that, they must be accountable and listen to and hear what their customers actually want.

This year will tell if it is Nokia and Windows Phone 8. If not, urgency will translate into emergency for Nokia. And the heat will really rise for Elop.

• Update: Charles Arthur writes: some commenters here and elsewhere have said that the Asha should be classed as a smartphone because it can run third-party apps. We have asked the research company Gartner to clarify this. Here's what a spokesperson said:

"Gartner says the Asha is a mobile phone not a smartphone. Gartner defines smartphones as having an open operating system:

"Open Operating System: an OS for which a software developer kit is available to developers, who can use native APIs to write applications. The OS can be supported by a sole vendor or multiple vendors. It can be, but does not have to be, open source. Examples are BlackBerry OS, iOS, Symbian, Android, Windows Phone, Linux, LiMo Foundation, webOS and bada."

It's the lack of a native API that means S40, used on the Asha range, isn't classed as a smartphone OS. Neither Gartner nor IDC, the other principal research company in this field, classes the Asha range as a "smartphone". Nokia itself does not include Asha sales in its "Smart Devices" classification in its financial results (see here for Q4 2012; PDF); it only includes Windows Phone and Symbian.